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So I'd like to buy a starter home maybe in the spring of summer 2015 (probably a townhome). I've taken a cursory look at zillow.com and found some around 150k in an area I like.
I have no idea how to get prepared for homebuying. Here's the financial details I'd imagine are relevant...
Time at current employer: 12yrs
Annual income: $66k base guaranteed, eligible for up to a $10k performance bonus annually (usually get about $7-8k of that)
2nd job (small fitness business): Pulls in about $200/$250 a month pretax. Hoping to double it in size this year, but by no means guaranteed.
Money in 401k (can access half as a homebuying loan repaid at 15yrs @ 4.25%) : $25k
emergency savings: $2k
other savings for the house: zero
Student loans outstanding: $82k-ish (I did a triple major at a private school, attended college as an adult, made too much for grants and loans, and no parental contribution, basically dropped what savings I already had into repayment)
Credit card debt outstanding: $10k-ish (Utilization is around 88%)
Personal loans outstanding: $13k and change
Car is paid off
Credit history: 16yrs
Late pays: none
Missed paymts: none
All accounts paid satisfactorily and on time
No judgements / public records / garnishments or anything like that
Inquiries in last 2 yrs: 3 (consolidated high interest subprime credit card debt into that personal loan above saving 16% average on interest)
Scores: EQ689, TU673, EX:694
Take home pay monthly: $3700ish (counting fitness biz)
Money paid to debt: $1950/mo (I'm paying 800ish/mo in student loans and the rest is double the minimum payments on the credit, with a little more given to the highest rate card first using the snowball method)
Monthly rent: $900
So generally I think I need to pay down some debt first according to the Fico simulators here, but is that the right call? It's defenitely manageable the way it is now, with a decent amount of discretionary money left over (I usually find myself with $600-$700 left over as "fun" money at month end). I don't live particularily extravagantly or anything. Just a cell phone only, a gym membership (both for recruiting clients and "looking the part"), and basic internet. No cable tv or other utilities or expenses. Based on home payment calulators, I would guesstimate (based on my small amount of knowledge) that a 30yr loan of a 150k townhome would actually save me about $200/mo over renting that I could then put towards the debt I have. It seems like if I were to stop renting and start owning I'd actually get out of debt quicker, but I don't know if that is realistic. I don't know that taking a 401k loan from myself is ideal, but it's an option and currently the only source of downpayment money.
Anyone care to give me a road map? Focus on my scores first? Debt first? Down payment first? Work on the emergency fund first? Start calling around for mortgage brokers? Something else? I have no idea what underwriters are looking for.
...pay yourself first ...I'd put at least three months income into your savings account (its the unexpected that gets most of us) ...then pay down your CCs to zero on all but one, keep 3-5% on your lowest rate card, and PIF the others each month ...your scores should jump into the mid 750s which will get you the best mortgage terms ...once your CC utilization is in order, look at your student and personal loans ...you need to have a sound pay-down record on both of them in amounts that will fit within your debt-to-income ratios before applying for a mortgage.
...once you've gotten your CCs and loans in order, I'd put every spare nickle into saving for a down payment and closing costs ...that 401k loan is tempting but you really need to look at the tradeoffs ...with the income you've cited, you might be able to save enough in a relatively short time without it.
...the other consideration is whether you really want to buy just yet ...$200 a month can be eaten very quickly when you own rather than rent ...taxes and insurance go up, appliances fail, the roof leaks, etc ...imnsho $200 is not enough of a reason to jump into home-ownership ...there are a lot of good reasons to own but thats a marginal one at best.
...and of course my advice is worth exactly what it cost you
@Lemmus wrote:...pay yourself first ...I'd put at least three months income into your savings account (its the unexpected that gets most of us) ...then pay down your CCs to zero on all but one, keep 3-5% on your lowest rate card, and PIF the others each month ...your scores should jump into the mid 750s which will get you the best mortgage terms ...once your CC utilization is in order, look at your student and personal loans ...you need to have a sound pay-down record on both of them in amounts that will fit within your debt-to-income ratios before applying for a mortgage.
...once you've gotten your CCs and loans in order, I'd put every spare nickle into saving for a down payment and closing costs ...that 401k loan is tempting but you really need to look at the tradeoffs ...with the income you've cited, you might be able to save enough in a relatively short time without it.
...the other consideration is whether you really want to buy just yet ...$200 a month can be eaten very quickly when you own rather than rent ...taxes and insurance go up, appliances fail, the roof leaks, etc ...imnsho $200 is not enough of a reason to jump into home-ownership ...there are a lot of good reasons to own but thats a marginal one at best.
...and of course my advice is worth exactly what it cost you
x2 - that's some very sound advice.